You have held a wide range of positions in both sales and product areas in Southeast Asia. What characterizes the region in your view?
Southeast Asia is well known for its diversity, both geographical and economic. You have Singapore, one of the wealthiest countries in the world, which is extremely productive and advanced in its IT deployment. But you also have countries such as Laos and Cambodia, where you would be hard pressed to find a PC.
Politically, too, countries in Southeast Asia vary significantly. Singapore is stable, whereas political change can be frequent in Indonesia and Thailand. For SAP, this diversity is reflected in the way we sell solutions and service our customers. Flexibility and sensitivity are key.
How do businesses in the region differ in the way they consume IT?
Because of this diversity, you can’t define a typical business in Southeast Asia. In Singapore, we see a public sector that is very keen to invest in IT.
In more populous, less developed markets such as Indonesia, Philippines, and Thailand, however, pioneering businesses are primarily from the private sector. Often these are family businesses that have passed down several generations. In many cases, the current owners have received part of their education and work experience abroad. They have brought business and IT skills back home with them and apply them to further their businesses.
In developing markets such as Cambodia, Laos, and Vietnam, the scene is again quite different. Here businesses that implement IT are usually multinationals or companies that provide infrastructure, such as those in oil and gas and utilities.
How has the economic downturn played out in Southeast Asia?
In my view, there is no credit crunch here. Banks in Southeast Asia are for the most part unaffected. What we do see is a crisis of confidence. The money is there, but banks want to know exactly what businesses plan on doing with it before they extend a loan. Business cases have to be very strong, and the return on investment rapid. Also, banks want to know exactly what will happen if returns aren’t high enough.
Developing countries are having a difficult time. They are very dependent on foreign investment. However, the lenders, many of whom are Western countries, aren’t sitting on a lot of cash at the moment. To win investment, countries such as Cambodia, Laos, and Vietnam must increase their transparency and accountability. Businesses in these countries will have to build processes and implement governance systems to show how investments flow through their operations.
Similar to the Asian financial crisis in 1997 and 1998, the region will go through some tough times, but these tough times will drive a change in culture, which will drive accountability and transparency.
Has the downturn affected IT spending in the region?
It has. Businesses are definitely looking for fast returns on investment. They have separated their nice-to-have projects from their must-have projects and are investing accordingly. I think that is the right approach.
But some companies are simply chopping costs 20% across the board. I don’t think that is smart. By doing that, a company has stamped its forehead, saying it is a victim of the crisis – there is no strategy in that.
Instead, businesses should get closer to their customers. Investing in a customer relationship management project can bring value to many businesses. Also, investing in projects around business intelligence can be highly beneficial; especially those that help businesses better manage their finances.
While many companies have implemented an ERP solution, only a few have enterprise performance management and business intelligence solutions, which can tell you which channels and lines of business are running well and which ones need attention.
What advice do you give businesses in the region for stemming the downturn?
I think businesses can do a great deal more than just stem the downturn. I think many companies can capitalize on it.
As many of the multinationals – typically the larger players in the region – cut costs across the board, domestic businesses are making a move. Companies in Indonesia, Malaysia, Philippines, and Thailand, for example, do as much as 90% of their business domestically. This sustained domestic demand can be used to fuel investment in exactly those things that the multinationals are cutting back on.
Domestic businesses can increase their R&D budgets and invest in solutions to become more efficient in their distribution. They can link up with the best retailers and vendors and optimize their procurement. That way they can both benefit immediately and take market share when the crisis begins to wane.
If they miss this opportunity, they will miss the opportunity of a lifetime.
About Krish Datta
Krish Datta was appointed to regional managing director for SAP Southeast Asia in January 2009. His experience with SAP in the region started in 1995. Throughout his career in the IT industry, Datta has held a number of positions, from industry business development for consumer packaged goods and retail, to product management, partner management, and country management.